The Equipment Maker Has Surged With Aggressive Marketing; Callaway Plots a Comeback

Five years ago, the two heavyweight contenders among golf-club makers were Callaway, still selling its famed Big Bertha drivers, and its Carlsbad, Calif., neighbor TaylorMade, pioneering moveable-weight technology. Yes, other companies were in the fight, each with its own strengths. Ping made great woods and irons; Cleveland was known for its wedges. Titleist and Mizuno catered to elite amateurs, while Cobra specialized in clubs for the common man. Nike had Tiger Woods. But overall, and especially in the all-important category of drivers, which players replace more often than other clubs and which have the highest price tags, the rivals from Carlsbad were way out in front.

Fast forward to today: TaylorMade hasn't just blown away Callaway, it now positively dominates the business. Last year in the U.S., TaylorMade captured 47% of every dollar spent on woods (drivers, fairway woods and hybrids), according to Golf Datatech, the industry's leading market-research firm. That's up from 26% in 2007 and a mere 11% of the driver-only market in 2002. In irons last year, it hauled in 25% of all sales, up from 16% in 2007. No other company comes close. Callaway, though still No. 2 in clubs overall, has slouched back closer to the pack. Its sales have declined 26% since 2007, while TaylorMade's in that period are up 21%.

TaylorMade's rise is even more remarkable considering that the $2.6 billion golf-equipment market, as tracked by Golf Datatech (excluding goods sold at sporting-goods stores and mass merchants), has shrunk by $300 million since 2007. Every bit of TaylorMade's growth has come from the hide of its competitors.

How did the company pull it off? Primarily by a relentlessly aggressive management style—"pushing the envelope on every front," in the words of Chief Executive Mark King—aided by some gambles that paid off, a series of missteps by Callaway and a recession poorly timed for everyone but TaylorMade.

It must be noted, however, that selling golf clubs is a mysterious and unpredictable business. In the olden days of commodity wooden drivers and irons, the key to success was an affable sales staff. Starting in the mid-1990s, technology took over. Club heads bloomed to the size of toasters and club faces were infused with "springlike effect." The competition these days is all about coming up with unique technological wrinkles, no matter how minor—and some are very minor, indeed, given the U.S. Golf Association's strict limits on club performance—that let clubs be sold as new and improved. As real as the cumulative technological progress has been, club makers are still mostly selling a dream: farther, higher and straighter, in the case of drivers.

The first key to TaylorMade's success was getting as many clubs as possible into the hands of PGA Tour pros. When King took over in 2000, he made that a top priority. In the eyes of golf consumers, there's no better validation of a club's worth than its use by the pros. For companies, building a Tour staff is expensive. Manning an equipment van at every event on every major pro tour costs big bucks. So does paying top players millions of dollars a year for their endorsements. In 2001, TaylorMade wrested the title of No. 1 driver on Tour away from Titleist, according to the Darrell Survey, and it has creatively exploited that advantage ever since. At this week's AT&T Pebble Beach National Pro-Am, for example, TaylorMade players such as Dustin Johnson,Retief Goosen and Robert Garrigus will be wearing high-visibility yellow bucket hats, at least part of the time, to promote the company's latest RocketBladez irons.

That name, RocketBladez, and the related golf-ball name, RocketBallz, is an another example of TaylorMade's aggressive style. It's a bit daring, given golf's staid ethos, but it's fun and the brand has killed in the marketplace. Trivial? Yes, but probably not as trivial as painting woods white. That, too, was perceived as a gamble when TaylorMade launched its R11 drivers in 2011. In an interview, King acknowledged that there wasn't dramatic new technology in the R11s. But the move to white was a home run, goosing TaylorMade's share of the driver market by 8%. "In our wildest dreams, we never imagined we would sell as many as we did," he said. In fact, the company had a contingency plan to revert to black drivers within six months, had the white experiment failed.

The paint job on this year's new driver, the R1, is another gamble. It retains the white but flashes orange and gray diagonal markings on the crown, defying the traditional logic that golfers prefer a symmetrical look to help with alignment. We'll see what happens.

The third leg of TaylorMade's success, besides Tour support and bold marketing, is ceaseless introduction of new products. Thanks to a huge research budget that golf-company analyst Casey Alexander of Gilford Securities estimates at around $30 million a year, TaylorMade floods the market with Next New Things every six months or so. The R1, for example, comes in only one club head (reducing manufacturing and distribution costs) that is adjustable from 8 degrees to 12 degrees. (Nike, Cobra and Adams Golf, which TaylorMade acquired last year, also have new, one-head adjustable-loft drivers.)

This constant deluge of new clubs is a boon to TaylorMade's marketing—there's always something fresh to hype—and a challenge for poorer competitors to compete against. It's analogous to a big corporation outlawyering weaker opponents. When other companies were forced to scale back costs during the recession that hit golf hard starting in 2008, TaylorMade, backed by its German parent, Adidas Group, turned up the heat. It suffered only one down year, 2009, and then only 2% in overall sales.

Callaway, in particular, was ill prepared for the recession. Its $183 million acquisition of Top-Flite in 2003 was a failure, ending in a sale of the division last year to Dick's Sporting Goods for peanuts. According to Gilford's Alexander, the company also wasted too much management time and millions of dollars on expanding into noncore businesses and on a fruitless golf-ball patent-infringement lawsuit against Titleist. It also suffered from wrongheaded marketing that focused on "image" rather than hard-core golf values under its former chief executive, ex-Revlon head George Fellows.

How long can TaylorMade stay on top? Golf as a business can be as fickle as golf the game. "Every golf-equipment company is just one bad decision away from losing substantial market share," Alexander said. Callaway in February hired a new chief executive, Chip Brewer, from Adams Golf. He has brought in a new management team, slashed overhead and refocused the company on high-performance products. It doesn't hurt, either, that Callaway staffer Phil Mickelson won so impressively last week at Phoenix and couldn't stop talking about his brand-new-on-Tuesday Callaway RAZR Fit Extreme driver.

Nike just signed world No. 1 Rory McIlroy to a ginormous, multiyear contract reportedly worth $50 million to $100 million. With Woods also still on board, and playing well, Team Swoosh now has the game's two biggest global icons. Things can change fast. Even so, for now, it's good to be TaylorMade.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.